Lower Trade Execution Expenses, Greater Transparency are Global Banks’ Main Aims

Industry trends such as margin compression, the drive for cost reduction and increasing regulatory pressures are forcing banks to seek ways to reduce trade execution expenses and gain transparency, reports Broadridge Financial Solutions.

The financial software group’s findings are in a capital markets industry viewpoint whitepaper titled
‘Key Challenges and Best Practices in Trade Expense Management’
.

According to the findings, the most sophisticated banks have moved toward a more centralised management of their expenses across business units and asset classes. This has allowed them to gain a more holistic view of their trade operations and promote greater efficiency in areas that include lower costs, negotiating more favourable vendor agreements and better allocation and forecast of expenses to create more accurate profit and loss (P&L) reports and budgets.

However, while most banks agree on the need for a more centralised and automated approach, very few have achieved it due to the challenges of creating a core utility linking various business functions and locations, as well as the need for invoice transparency, data and fee accuracy and regulatory compliance.

“There is a compelling business need and bottom line impact for banks to assess their current trade expense management practices,” said Terence Faherty, head of product strategy for Broadridge’s revenue and expense management solutions.

“Many of the challenges the industry faces around fee schedules are not new; however, there are increased complexities and regulatory pressures. We expect these trends to continue and will result in the need for an automated and centralised expense management utility that can provide a more holistic and data-driven view of the organisation. This approach will allow for improved accuracy and transparency that can drive greater efficiencies and cost reductions.”

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